Newsec Property Outlook - Autumn 2022

Newsec Property Outlook

ESG – the moment of truth for Real Estate?

Real estate currently accounts for close to 40% of global carbon emissions. Even medium-sized reductions from the industry are thus bound to have significant impact, not only on the climate but also on costs. A win-win situation if ever there was one. Yet, we have not noticed any significant change in the energy consumption per capita for real estate over the last ten years.

But while there is inertia, the topic of ESG is as near the top of the agenda in real estate as it’s ever been. And there are plenty of areas within ESG to address.

To mention a few, physical climate risks (e.g. floods, fire), transitional climate risks (e.g. changes in regulation and consumer behavior) and greenhouse emissions. All three entail risks and associated costs.

We continue to see the transaction volume of environmentally certified buildings increase. Today they account for over 10 per cent of the total volume. Still, the overall share of buildings with certifica tions amounts to a mere sliver.

In the social realm, there is ample opportunity for the real estate sector to assume an important role in the development of tomorrow’s society. Its role in reducing segregation is already a hot subject, as are the potential upsides of doing so.

To be a forerunner in ESG means embracing digitalization. Owners will need to continue to

implement technology which can accurately measure and gather relevant data. They will look to gather as many insights as they can from efficient monitoring of their properties (indoor climate, utilization rates, movements, and usage patterns for different spaces). Through increased awareness of energy impact and behavioural patterns, owners and their partners will be able to take action to in crease productivity, safety, environmental stand ards, and improve the overall tenant experience.

Going forward, we will keep an eye on the relation ship between responsible initiatives and environ mental certifications on one hand and property values on the other. Will we see financing becoming more favourable to owners and investors who set the bar high on ESG regardless of regulation and certifications, and can demonstrate its effects?

ESG is not only the moment of truth, but an opportu nity of a lifetime for the real estate market. Instead of being part of the problem, we hold the keys to the solution. If anything, the future promises plenty of exciting development.

Max Barclay, Head of Advisory within Newsec

and is

possession or supplied to

upon material in

that we believe to be reliable. Whilst every effort has been made to ensure its accuracy and completeness, we cannot offer any warranty that factual errors may not have occurred. Newsec takes no responsibility for any damage or loss suffered by reason of the inaccuracy of this report.

Box 7795, SE-103 96

+ 46 8 454

use the

in the Newsec

must be made

Your Partner in the North

Newsec is the solid choice of partner within Advisory and Property Asset Management. With sharp analyses, hard facts and just the right skill set, we’ve got you covered.

Photo:

No light in the tunnel yet

Covid, inflation, rate hikes, war, market blowout. Recent years have seen huge economic shocks. Property markets all over the world have been hammered, also in the Nordic region. The question is whether we are close to the trough or whether the beating will continue for yet some time. Unfortunately, the risks are skewed to the downside. Real demand is falling while rates are rising. They will stay elevated also during 2023, which will slow down the eventual property rebound.

Klas Eklund, Senior Economist, Mannheimer Swartling

At the time of writing the Newsec Property Outlook for Spring 2022, inflation was rising and central banks were turning hawkish after many years of under-estimating inflation. Property markets had started to turn down. I warned that a period of uncertainty and market turbulence was likely before a new property market equilibrium could be found.

But events unfolded worse than that. Just as the report was sent to the printer, Russian troops massed at the Ukrainian border. When the report

was published, the invasion had already begun. As a result, oil and gas prices rose, as did the price of grain and other foodstuffs. Real income and produc tion in Europe was hurt. Stagflation came knocking on the door. Central banks set inflation-bashing as their core priority.

Now, the war has already been ongoing for half a year. Supply restraints and sanctions are hurting the economies in Europe. Key rates and short term market rates are rising, which is hurting property

restraints and sanctions are hurting the economies in Europe”

markets. High inflation is undermining real income, which hits private consumption and GDP as a whole. Looking ahead, these three uncertainties – inflation, rates and real contraction – will decide the develop ment of property.

High inflation, risk of recession

Inflation has in most Western countries reached levels not seen for 30-40 years. The inflationary im pulse has come both from supply (bottlenecks) and demand (fiscal stimulus). Originally concentrated in commodity markets, inflation is now wide-spread. There are signs that some of the bottlenecks from the pandemic are easing, lowering that inflationary pressure. However, as gas deliveries from Russia to Europe are being cut off, gas prices are rising –and as a result electricity prices follow suit. Term contracts are sky-rocketing, indicating a winter with inadequate access to electricity and falling real income.

This will not have a great impact in the US, where inflation probably has peaked, but it will push up in flation in Europe further. It is probable that inflation will reach 9–10 per cent for the Euro area as a whole; in the UK it will rise to some 13–14 per cent or even more.

It is obvious that central banks have made severe policy mistakes, underestimating inflation, claim ing it would be low and transitory. Now they have to make up lost ground and regain trust, which means hiking rates quickly and high. The Fed has hiked in big steps, and the ECB is following. In summer, the ECB hiked its key rate for the first time in 11 years – and for the first time ever by 50 bps. More big steps will follow.

We are now in uncharted territory. However, it is possible now the Fed hiking cycle will reach its peak

as early as this winter, as the American economy slows down and hovers on the brink of recession. In summer, bond markets rallied on that hope, but the Fed has quenched that optimism and stated it will pursue its hawkish stance.

Negative yield curves indicate that markets are pessimistic about future growth. It is yet, however, an open question how much unemployment must rise to defeat inflation.

• The US economy is in better shape than Europe’s, but several independent economists are still pessimistic that considerably tighter policy and an ensuing recession will be necessary. An inflation rate this high has never been defeated without a recession.

• Europe shows slower productivity growth, worse employment numbers – and is much more vulnerable to the Russian gas weapon. High in flation will cut into real income and cause private consumption to fall. The UK is in a particularly bad spot, due to slow productivity growth and negative Brexit effects. Euro zone GDP growth will probably come in at just a crawl during the winter and spring of 2023. Some quarters will show negative growth. An outright recession is likely in Germany and some Eastern European countries.

Fiscal policy might help alleviate the pain, e.g through direct subsidies to households, to com pensate for high electricity prices. However, such benefits come at a cost – not only supporting Russian exports during the war but also hurting government finances. Government debt will rise, and the ECB will need to support countries where the bond yield spreads rise – and create future problems.

Market developments

In spring, bond yields rose sharply, anticipating key rate hikes. The blow-out in international bond markets was the worst for several decades. But in summer, yields actually fell back. The reason was central banks taking a tougher anti-inflationary stance, giving some hope that inflation will fall back next year and short-term rates may peak early. The other reason is the risk of recession, which clearly has increased. However, markets were too quick; central banks still need to continue tightening pol icy. After some hawkish speeches from the Fed and the ECB, yields moved up again. The volatile path is typical of a market still shrouded in deep uncer tainty – and will remain there until more clarity has been won over the development of inflation, rates and real growth. Even though both short-term and long-term yields may peak during winter, they will only slowly fall back.

Stock markets fell in spring but rebounded in summer, partly courtesy of good quarterly reports from many companies, but also for reasons given above: hopes that the period of rate increases will soon be over. Once again, I would like to warn of too strong rebound hopes. High inflation and key rate hikes normally hurt stock markets. As bond yields move up, stocks will show continued vulnerability.

In this environment, property has suffered, just about everywhere. Increasing rates and rising costs have hurt both construction and prices. In most European countries, we have seen a slowdown, after several years of rapid rises. Still, property as an asset class has fared better than both bonds and stocks – which is what we should expect as real yields (which have fallen) are more important.

But in e.g Sweden prices of houses and flats are actually falling. The reason is that property markets

were more vulnerable in Sweden than in most countries, given high household debt.

Given the scenario pictured above, it would be surprising if the trough is reached soon.

The Nordics

The Nordic region showed great resilience during the pandemic. Throughout the initial phase of the Ukrainian war, the Nordics also did well. But infla tion is high in all countries. It will fall back in 2023, more markedly in Norway and Finland, more slowly in Sweden and Denmark. The real economies will slow, and the region as a whole will suffer a rather mild recession.

Denmark and Sweden will show the weakest real development, because of the need to cool off an overheated economy. Norway will – as always – be the strongest performer, courtesy of oil and gas reve nues. Monetary policy will differ between countries, as monetary regimes differ – Finland is a member of the Euro zone, Demark has a fixed exchange rate to the Euro, Sweden is an EU member but with a floating currency, while Norway is outside the EU. Housing markets will decline for some time yet.

Sweden

For a long time, Sweden‘s monetary policy was an outlier, the Riksbank pursuing negative rates and

massive QE at the same time. The wake-up call has been brutal, with the Riksbank having to make up lost time by delivering big hikes, fast and high. This in a situation when growth is slowing and GDP fore casts point to more or less zero GDP growth in 2023.

High inflation and stagnant real growth means that disposable income falls dramatically. Higher rates and falling real income means high-debt households will suffer. Add to that rising construction costs and sharply higher electricity bills, and of course the housing market will fall. In summer, house prices and flats fell by almost 10 per cent. Given the macro backdrop, housing prices will fall further.

“Term contracts are sky-rocketing, indicating a winter with inadequate access to electricity and falling real income”

Commercial property is not as vulnerable since companies can compensate and react to problems more actively than households. But more expensive funding will hurt profitability. Real estate compa nies have been hit hard on the stock market. Yields will rise for the first time since the Great Financial Crisis in 2008–09, mirroring rising interest rates. Consolidation of the sector will continue, as weaker companies are bought by stronger ones.

Denmark

Denmark experienced the strongest bounce-back in the Nordic region after the pandemic. GDP growth has been strong and inflation is high – it may actually peak at an even higher level than in Sweden. Consumer confidence has collapsed, which will have negative consequences for consumption. Construction has been an important growth engine, increasing its share of GDP. This rapid rise, however, means that the fall – which has now started – can become unpleasant.

Denmark’s central bank will continue to shadow the ECB in order to keep the currency stable. Rising rates and falling real income will lead to a cooling-off of the economy. Tight fiscal policy

“We are now back in a scenario where inflationbashing likely will lead to recessions in many countries, including the Nordics and Baltics”

will exacerbate the effects. The over-heated labour market will weaken and see rising unemployment. Negative GDP growth in 2023 is a clear risk.The prop erty market was strong in the first half of 2022, with a high level of transactions, largely driven by foreign investors. The worsening macro environment and rising interest rates have recently made investors more cautious, but growth has held up well so far.

Norway

Norway has been on the verge of over-heating, with a strong property market, fuelled by oil and gas reve nue. Inflation is high, but not as high as in Sweden or Denmark. One reason is that the Norwegian krone has performed better than the Swedish, meaning Norway does not import as much inflation. Wage in creases have been rapid, the labour market is tight.

All this has caused Norges Bank to hike earlier and faster than her neighbours. No surprise, since Norway has a tradition of higher rates, caused by the perennial inflation risk emanating from the oil sector and an overheating property market. Also during this cycle, the key rate will be lifted higher than in Sweden – and much higher than in Finland and Denmark, where the ECB sets the pace. Mortgage rates will, consequently, rise more than in the other Nordic countries.

The Norwegian property market has been excep tionally strong in recent years, also during H1 of 2022. Housing prices continued to rally. But tighter monetary policy and a slow down of the economy will have negative effects on real estate. The trans action market is thus now weakening. Prices will cool, but not fall as deeply as in Sweden or Denmark.

Finland

Finland started 2022 on a strong note. The economy has shown surprising resilience to both covid and

the invasion of Ukraine – so far. But harder times are now arriving. As the war in Ukraine drags on, this will cause increasing problems in Finland, who has been more dependent on Russian gas and trade than the other Nordic countries. Supply bottlenecks are pushing up inflation, and – as in the other Nordic countries – household confidence is hurting. This will lower consumption growth.

Also in Finland, monetary policy will cool off the economy, but as Finland is a member of the Euro zone, and the ECB sets the key rate, the hikes will be smaller than in Norway and Sweden. But recession is looming for 2023 and construction will slow. The property sector performed well in H1 2022, despite the war. Transaction volumes saw record highs propelled by megadeals. However, the envi ronment is getting more challenging and yields will probably rise. Construction in the property sector is falling.

The Baltics

The three Baltic economies have gone through wild gyrations in recent years. They were hard hit by Covid, then made an impressive comeback, entering 2022 with strong growth, in particular in Estonia. Labour markets are strong in the region, resulting in rapid wage hikes. But now they are all suffering from the Russian invasion of Ukraine, as well as from Western sanctions. Russia has traditionally been an important trading partner, but now trade with the big Eastern neighbour is falling sharply.

GDP growth will fall sharply in all three countries this year, and in 2023 it will hover around zero in both Lithuania and Estonia. Latvia may fare better in 2023 – at the cost of higher inflation. Supply dis turbances and rapid wage increases are pushing up inflation to extreme levels – some 17–18 per cent this year in all three countries.

Monetary policy will tighten, but since the ECB sets its rates based on the economy of the Euro zone as a whole, the expected hikes will not be sufficient to stop inflation. Also next year, inflation in the Baltics will be much higher than in the rest of Europe –probably some 6-8 per cent, even higher in Latvia. So stagflation will characterise all three countries.

Conclusion

In the spring Newsec Property Outlook, the forecast rested on the assumption that monetary tightening would be gradual and that housing markets would cool, but in a measured way. Those assumptions have proved to be wrong. The war hit, inflation rose further – and central banks abandoned the gradual approach in favour of swifter tightening. We are now back in a scenario where inflation-bashing likely will lead to recessions in many countries, including the Nordics and Baltics. As a result, housing markets have fallen.

The long-term question is when – or rather whether – inflation and interest rates will fall back to the low levels of recent years. Here, the jury is still out, but the tendency is that forecasters have become more pessimistic. Inflation has become increasingly entrenched and it will take some time to stamp it out – and only at a higher cost.

Global savings will probably remain high, which speaks in favour of low real rates. But supply distur bances because of war, protectionism, “decoupling” and sanctions will linger for some time. Thus, we probably should assume that inflation will stay above central bank targets for at least another two years. As a result, key rates will need to stay above neutral levels for some time. This would mean that the rebound of property markets will be slower than during the covid years.

Definitions:

• ESG: environmental social and governance

• Green bonds: financing dedicated to environmental benefit

• Social bonds: financing dedicated to social benefit

• Sustainability bonds: financing dedicated to both social and environmental benefit

ESG – responsibility never sleeps

A take on the market for responsible initiatives

Several events playing out simultaneously in the last two years have made ESG a major topic of discussion. A few of these events include the pandemic, COP26, the supply chain crisis, the global heat crisis, and the war in Ukraine. The real estate sector which currently accounts for 40% of the global greenhouse emissions has become the center of attention. The sector is now holding the cards to eminently improve the world and in turn the companies’ own ESG profiles and longterm profitability. The question remains if the sector is up for the task.

Environmental sustainability

– growing rapidly on the Nordic market

It is undoubtedly so that recent years have changed a lot within the field of sustainability. Environmen tal initiatives are seen, and activist voices are heard more than ever with people such as Greta Thunberg leading the masses. The shift towards electric vehicles has sped up and the war in Ukraine has demonstrated the European dependency on fossil fuels. The “E” in ESG has also become more relevant within the real estate sector, most clearly represented in the Nordics through the rise of the green bond following the massive increase in envi ronmental certifications. Although the change in the real estate sector is at an early stage, perhaps lagging the transportation sector and the construction sector in some regards, interest for the topic has never been higher. The real estate sector in the Nordics has although also in some ways been an early adapter, through for example the first issuance of a corporate green bond worldwide. However, as initiatives have grown, the energy consumption per capita for real estate has remained roughly the same (exhibit 1) pointing towards need for an increased

effort from real estate companies – something we are already noticing on the market.

Certifications, a giant on the Nordic transaction market

The interest in environmentally sustainable build ings is expanding and on the Nordic transaction market, the transaction volume for environmentally certified buildings has more than tripled, seen in exhibit 2. In 2015, the transaction volume for certi fied buildings amounted to €2.1 billion and has since risen to €7.6 billion last year, representing approx imately 10 percent of the total Nordic transaction volume. On the acquisition side, institutions account for the largest share of transactions, while sellers are often developers selling recently completed buildings. More recently, however, in-use certifica tions have risen in popularity, a type of certification which is used for existing buildings. In 2015 in-use certifications only represented 2% of all properties which were certified that year, in 2021 the same number amounted to more than 50% in the Nordics. This trend is not only bound to the Nordics, but seen across Europe, with in-use certifications for example

increasing by as much as 28% in the Netherlands last year. Several property owners are realizing the benefits of certifying their entire portfolio, with benefits in terms of both cost savings and on the investment market.

Catching up with the substantial interest on the investment market is a job easier said than done. At this point a mere 0.38% of total properties in the Nordics are certified (seen in exhibit 3). The same number for commercial buildings (office, retail, and hotels) is larger, standing at 1.90% of the entire stock. The relatively large share might be due to pressures and requests existing throughout the value chain starting at the construction companies and ending at the tenants. This phenomenon is also beginning to spill into the industrial segment and especially the logistics sub-segment, however, currently only 0.12 percent of buildings within the segment are certi fied. This is due to low levels of new production and an old industrial stock, as well as a general difficulty to fulfill ESG criteria for industrial buildings, as the criteria have traditionally not catered to the segment. The general low share of certified buildings provides an opportunity for property owners to cer tify their portfolios and increase their attractiveness on the investment market. Private individuals can also reap the benefits with tenant owned apartment buildings being highly underrepresented among in-use certified buildings – collective initiatives can hence enable for green mortgages and lower operational costs.

Regulation intensifies in Europe and in the Nordics

Today, certain certifications which are set as the minimum requirement to be entitled to green financing are overrepresented on the market, meaning that if requirements were to become stricter, many property owners might have to invest

in improvements. New regulation, stricter and broader criteria are emerging on to the market for certifications, as the EU is adopting the new taxon omy. The Swedish certification Miljöbyggnad is for example launching Miljöbyggnad 4.0 and Miljö byggnad i-drift 2.0, aiming to incorporate the EU taxonomy. The broader criteria might e.g. include physical climate risk (e.g. floods, fire) and transi tional climate risk (e.g. changes in regulation and consumer behavior) – incorporating risks and costs associated with climate change. These parameters are expected to emerge on the real estate market and begin to be included in real estate valuations and investment decisions as well as real estate related financing decisions. Larger investors and institu tional investors are likely to be the first adopters as well as banks and other financiers. However, the change will be gradual and initial inertia is expected. It will nonetheless be critical for real estate compa nies to act swiftly and in turn benefit from the changes as they are implemented on the market, rather than being a late adopter.

Digitalization enables for an easier transition

To be positioned at the forefront of environmental initiatives, it will be necessary to embrace digitali zation. Real estate, a sector which traditionally has been slow to adapt to digitalization and innovation, is changing. Digitalization initiatives are on the rise and last year property technology companies raised $32 billion in funding worldwide. Digital innovation can bring massive value to property companies, as e.g. demonstrated by the Swedish municipal com pany Örebrobostäder, which managed to decrease costs in their residential portfolio by an annual ~€8 million or ~€6 per square meter. The company mapped out and addressed major energy consumers through digital solutions as well as implemented measuring and payment systems to alter consumer behavior in common washing rooms.

“To be positioned at the forefront of environmental initiatives, it will be necessary to embrace digitalization”

Exhibi t 4: Issu ance

Luxe mbourg Sweden Norway Netherlands Nordics France Germany Finlan d Denmark Spain United States Belgium Japan United Kingdom Italy

bonds 2020 (USD)

Exhibi t

MUSD

10 0,000

80,000

Su

aina ble bonds issu ance 2020 divided

cent

and countr

va lue per capita for green Sustainability Bond

The real estate sector is in general by fa r the most active sector on the bond market in the Nordic s, representing 53% of investment grade issuance and 44% of high yield last year Howeve r, exhibit 4 & 5 re presents al bond issuers.

05 00 1,000 1, 50 02 ,000 2,50 03,000

The real estate sector is in general by fa r the most active sector on the bond market in the Nordic s, representing 53% of investment grade issuance and 44% of high yield last year. H oweve r, exhibit 4 & 5 represents al bond issuance .

There are several benefits of acting environmen tally responsible e.g. through cost cutting and the investment market. Regulation is bound to get stricter and pressures from investors are increasing. Hence, it will also become important to examine the full scope of ESG – e.g. real estate companies are believed to be able to make a severe impact within the “S”.

The surprisingly untouched market for social initiatives

ESG initiatives which are heard and seen are most often related to the environment and are in much fewer cases related to social initiatives. This can be clearly distinguished through the bond market where real estate companies as mentioned previ ously are frequent users of green bonds - with more than half of all Nordic public real estate companies having issued a green bond – but not of social bonds. Green bonds are also more common in the Nordics compared to other European countries (exhibit 4).

60,000

40,000

20,000

0

Social Bond

Green Bond (lef t axis)

Share social & sustainability bond (right axis)

■ Green Bond

Social Bond

Sustainability Bond (lef t axis)

For issued volume of green bonds per capita, Sweden exhibits the second largest number, Norway the third and the Nordics collectively the 5th largest number of the 15 listed countries.

Meanwhile, social financing is rarely seen on the Nordic capital markets and the Nordic countries generally display a lower share of social and sus tainability bonds, as seen in exihibit 5. The lack of this type of financing can lead one to the conclusion that there must be fewer opportunities to engage in social projects in the countries. On the contrary, many of the larger cities in the Nordics are experi encing problems with segregation which in many cases are worse than in the rest of Europe. Exhibit 6 shows the share of foreign-born people in the Nordic countries and their unemployment level compared to the unemployment level of the native-born popu lation (commonly used factors to measure segrega tion). It is apparent that the foreign-born population has a higher unemployment than the native-born

Share social & sustainability bond (right axis)

population and a higher unemployment compared to the rest of the countries. Looking at major cities the picture is worse, where the non-European born population is usually concentrated to areas in the outskirts which often have a higher unemployment and crime rate. The segregation in major cities is a problem where the built environment can make a difference, and where business and social initiatives can go hand in hand. Examples include upgrading local malls and offices as well as working with local authorities to enable diverse construction and im provements in the existing stock.

Social bonds on the rise

Difficulties to measure output of social initiatives in combination with an already maturing green financing market and low experience among financiers and issuers is believed to be a vital reason for the unproportionate low share of social financing in the Nordics. This means that companies in many cases choose green financing instead due to the

0.

0. 20

0.15

0.10

0.05

0.00

additional costs related to the other type of issuance. It will thus be important for initiatives throughout the value chain to ensure transparency and ease the process of taking a social loan or issuing a social bond. It would be advantageous if structures in current frameworks for green bonds can be utilized, thus minimizing operational costs related to the issuance. Creating a clear structure for measure ment and follow up must be derived from all parties where real estate companies should act as innova tors and not only as adapters.

If regulation tightens for green initiatives, social financing might become more favorable, and as shown above there is a great need for social invest ments in the Nordics. The share of social bonds and especially sustainability bonds are thus expected to increase in the coming years and real estate com panies acting today will benefit from a first mover advantage.

The future of sustainable real estate

Although the subject of ESG has been around for some time, it is still in bloom, especially so within the real estate industry. The pace of change is expected to increase and the future of ESG will be correlated to the future of digitalization. Synergies between the areas are many and will increase as im plementation becomes widespread. Companies will need to continue to implement technology which ac curately can measure and gather data. Furthermore, companies must also leverage the many insights acquired from property data (such as indoor climate, utilization rate, movement, and usage patterns of different spaces). By gaining higher awareness of energy impact and behavioral patterns, actions can be taken to increase productivity, safety, environ mental standards, and an overall improved tenant experience. With the help of Newsec’s latest initi ative “Newsec Digital Accelerator,” companies can acquire advice and assistance throughout this entire

process – accelerating and improving both their digital and ESG profile.

Having an ESG profile, net-zero emission goals and working actively to improve it will become the new normal. Companies are recommended to not only focus on major environmental investments such as solar panels, but also enhance soft parameters of buildings. Since environmental gains are often easier to achieve at a fairer price through such improve ments and are thus not only available to large actors but also SMEs. However, in the long term, all types of changes will be needed as more developers and property owners aim to supply the market with buildings that align with a shift into a circular economy. Evaluating and estimating costs of tran sitional and physical climate risk will increase in importance and, in the midterm, become common praxis. These types of risks are likely to be incor porated in financing, insurance, and investment decisions, as well as valuations.

Next steps for ESG

The change will also require higher ESG standards throughout the value chain. It is apparent that large advancements have been noted in segments within real estate where this has been the case. Transparen cy will thus play a vital role to ease decision making for tenants, developers and property owners when choosing an ESG friendly partner. In terms of social awareness, initiatives must also derive from within real estate companies which have the power to improve socio economic situations in less fortunate areas (perhaps acting in collaboration with local au thorities). A few examples of initiatives could include improving residential conditions, creating mixed-use buildings or mixed-rent buildings, as well as working together with tenants to create activity centers. In turn, properties can increase in value through higher rents or lower vacancies. Retail, office, and residen

tial owners are companies which stand to gain from such initiatives. Social and environmental efforts can also go hand in hand. This was noted during this summer’s heat waves, where an upgrade of a build ing could enable for a healthier work environment and also potentially create a more environmentally friendly building. Such upgrades would also serve tenants since these would allow for their work force to be more productive. As social initiatives often are challenging to implement, advantageous financing conditions might ease this process for companies. This could enable alternative sustainable financing such as social and sustainability financing to gain importance on the Nordic capital markets.

Lastly, this edition of the Nordic Property Outlook has just graced the surface of the ESG subject. However, as ESG will continue to increase its influ ence on the coming development of the real estate sector, highlighting the issues and the opportunities that exist within the field is of great importance. Navigating the maze of ESG is, however, not always easy - thus, for questions and advice regarding your ESG needs, contact Newsec, and we will be happy to assist you in your transition to a better tomorrow.

Adam Tyrcha, PhD, adam.tyrcha@newsec.se

Ulrika Lindmark, ulrika.lindmark@newsec.se

Ravi Barot, ravi.barot@newsec.se

“Having an ESG profile, net-zero emission goals and working actively to improve it will become the new normal”

Property Markets

The Swedish property market

Europe has experienced several setbacks throughout the year, with the war in Ukraine being the most sig nificant. The macroeconomic situation has in turn worsened and central banks have gone from easing to tightening. Many analysts believe a recession is coming; however, it is unlikely that the full year GDP growth in Sweden will enter negative territory, although it is possible that the economy will formally be in recession. The GDP growth is projected to end up at 2% in 2022. Inflation in Sweden has risen sharply to levels not previously noted this decade, however, inflation levels remain below those of the Eurozone and the major economies in the West. Unemployment remains relatively high compared to the rest of western Europe, but Sweden is yet to see

a substantial increase in unemployment and much like the U.S. the labour market remains relatively tight, though at a higher base unemployment level. The Swedish Riksbank has raised the key interest rate to 0.75% and is projected to raise rates further by an additional 150 basis points in 2022.

The outlook for the real estate market has darkened somewhat and is thus mimicking the outlook for the macroeconomic environment. The market has cooled off since the record year of 2021 and projec tions point to slightly falling transaction volumes and rising yields. The transaction market has however been active throughout Q1 and Q2, noting lower levels than last year but higher than 2015 through 2020 making it, thus far, the second strongest year in the history of the Swedish real estate transaction market. The third and fourth quarter are likely to hold the answers to many of the questions and worries which the market is now asking itself. So far, evidence from closed transactions paints a quite different picture than the worries and negative projections heard and seen in the press. Newsec estimates the year end volume to end up at SEK 250 billion, which would make 2022 the second strongest year on the real estate transaction market of all time.

Contact: Adam Tyrcha, PhD adam.tyrcha@newsec.se

A tougher climate ahead – the market has passed its peak

“ The market has cooled off since the record year of 2021 and projections point to slightly falling transaction volumes and rising yields”

Interesting trends on the Swedish property market in 2022

Yield rise?!

For the first time since the GFC, the Swedish real estate market is experienc ing yields rising. The market has noted an almost unbroken trend of compres sion since 2010, with the exception of retail which saw yields rise during the pandemic in 2020. In 2020, the other segments also saw yields briefly flatten, however compression was soon to follow. The return of inflation and the changed macroeconomic environment with interest rates and inflation on the rise has altered the outlook for the real estate market in Sweden. Financing costs are increasing and will probably surpass the record low yields, noted earlier this year, for many properties. Thus, although not yet widely noted on the transaction market, yields will most likely soon begin to rise more substantially. Inflation is boosting rents for now and in turn keep ing values steady, however, the autumn might change that.

Public buyouts are lurking around the corner

The stock market in Sweden has, not unlike other markets, fallen sharply this year. Real estate companies have on average seen a steeper decline than benchmark indexes. Some real estate companies have even experienced de clines in their stock value of more than 50% since January. With large downfalls, mispricing is likely to occur and large funds and cash strong real estate compa nies might find opportunities for acquisi

tions. Cross-ownership between compa nies is not uncommon in Sweden and if refinancing becomes difficult, fire sales of those positions might also present opportunities for cheap acquisitions.

Equity buyers stand strong

The previous years have been good to real estate funds which have raised a mas sive amount of capital. A lot of recently raised capital has not yet been placed and these actors are thus, compared to many real estate companies, cash strong. As indebted companies begin to struggle, an increase of equity buyers’ presence on the transaction market is expected.

A slight increase in the share of these types of investors has been noted on the transaction market in Q2, but listed and private real estate companies remain the dominant actors.

Relatively high transaction volume despite uncertain market

The transaction market has been rela tively strong throughout the year, despite the current uncertainty. The transac tion volume in 2022 will not match 2021, however the volume has so far this year already reached levels comparable to the full year levels of 2015, 2017 and 2018. The transaction market has thus been active. The third quarter has thus far reached levels similar to the ones noted in 2020 and both the second and third quarter noted transaction volumes higher than 2019. Thus, even though the market is slowing down, the number of transac

tions and the volumes are still at histori cally relatively high levels, suggesting an active market even in uncertain times.

Larger deals are likely to be less common, while the market for small-mid size deals will remain active.

The withdrawal from the residential segment

The residential segment, which has become the most popular in the past few years, has quickly lost investor attention as the macroeconomic environment has changed. The tenant contracts seen in the segment are not CPI adjusted, nor are they triple-net. Thus, costs are increasing while rents are likely to note a lower increase – reducing the NOI of the properties. The segment has also noted a massive yield compression and as rates are rapidly increasing and in turn pushing financing costs higher, it has become difficult for players to close deals at previously noted levels. At the same time, building costs are soaring and the government has removed the subsidy for new production rental apartments, making it more difficult for developers to complete construction. New regulation has also put an additional cap on new production rental growth. The segment is thus in dire straits, with less interest for the segment being noted. The residential segment’s share of the total transaction volume has fallen from a dominant 35% last year to 28% this year, and a share of just 21% in the second quarter.

SEK

billion

Total investment volume in 2021

SEK

Total

billion

expected in 2022

GDP

2022

The Norwegian property market

Inflation has reached record high levels in several countries this past year with Norway being no exception. Lockdowns during the pandemic led to bottlenecks in the supply chain followed by further supply disruptions caused by the war in Ukraine. Energy and food prices have increased significantly as a consequence of reduced production rates and sanctions towards Russia. To combat inflation, the Norwegian central bank has raised the policy rate to 1.75% and is signaling further increases later this year. The GDP growth is expected to amount to 3.5% in 2022 and 1.1% in 2023 for the mainland economy.

The prospects for a weak economic growth in com bination with high inflation have raised concerns for stagflation. The unemployment rate has fallen and is approaching 3.2% and is thus at a very low level in a European context. The number of vacant positions is high, and companies are reporting a labor shortage. The tight labor market puts even further pressure on wages and prices.

The Norwegian real estate market has been excep tionally strong these past years with 2021 being a record year in terms of both transaction volume, number of transactions and property price tags. The first quarter of 2022 noted a record high volume of NOK 30 billion. The principal cause for this year’s strong start was most likely due to transactions that were initiated at the end of 2021. Despite a great start to the year, the transaction market has weakened moving into Q3. The policy rate increases, and global instability create an uncertain environment in the real estate market. The full year volume for 2022 is expected to amount to NOK 120 billion, thus not surpassing the record year of 2021, but still posting a solid year.

Contact: Øyvind Johan Dahl ojd@newsec.no

Promising start to the transaction year despite uncertain times

“ The first quarter of 2022 noted a record high volume of NOK 30 billion”

Interesting trends on the Norwegian property market in 2022

Sustainable financing becomes more important

Since the last financial crisis, commer cial real estate companies have be come more financially solid and better equipped for a price fall and increased interest rates. Even though we are moving towards tougher times, banks remain willing to lend towards the real estate sector, although they are expected to become more selective and attentive of counterparty risk. It is communicated that the ESG aspects will become more and more important when banks issue credits. Green loans will e.g. be bene ficial for borrowers as they receive an interest discount of approximately 5–25 basis points.

Uncertain times and hesitant foreign investors

Thus far this year, international invest ments have accounted for 11% of the total transaction volume – one of the weakest years for foreign investors in recent years in terms of volume. Due to the war in Ukraine and Norway’s proximity to Russia, international investors outside the Nordics and Europe may be some what hesitant towards the Norwegian real estate market. The reluctance of foreign buyers is expected to continue to affect the market.

Increasing demand for prime logistics

The sped-up growth in e-commerce the past years has led to a higher demand for prime logistics and distribution hubs.

Warehouse and logistics buildings close to the city center continue to be in short supply in Oslo. The segment is expected to see an increase in rental levels, which will be the main value driver going for ward as yields are likely to rise. The low supply of the property type is also driven by an extensive conversion of industrial buildings to residential housing.

Surging construction costs

Construction costs continue to increase and are mainly driven by higher material costs as labor costs are kept at a more moderate level. There are two main rea sons for the increase in material costs.

First, Canada had a large outbreak of mountain pine beetles in 2020 which led to a reduced extraction of timber. Since there was less timber available, the US had to import from Europe instead which pushed prices up. The shortage of goods continues in Europe. The weak currency in Norway has added on to the effect and caused building material prices to rise even further. On an annual basis, building materials have risen in price by as much as 23%. The effects are expected to last throughout the year.

The office segment continues to dominate the market

The first half of 2022 started out strong for the office segment where offices are still the segment with the most transac tions over NOK one billion. In terms of prices, the spread between the most and least attractive office buildings widened through the first quarter, while yield levels appear to have stabilized at the start of the second quarter. In the rental market, prices have increased through 2022 and can hopefully make up for some of the expected rises in yields.

NOK 166 billion

Total investment volume in 2021

NOK 120 billion

Total investment volume expected in 2022

GDP growth expected in 2022

The Danish property market

The uncertainty about the economic outlook has in creased significantly in 2022 due to external factors; war in Ukraine, global supply problems, accelerating inflation and rising interest rates. The uncertainty has led to a drop in business confidence and negative economic indicators for construction, manufacturing and the retail sector. GDP contracted in Q1 2022, and the stagflation scenario has become more likely. If Russia sticks to its policy of turning off the oil and gas supply to Europe, economic growth could be reduced significantly, and inflation could accelerate even further. This scenario would, according to the Ministry of Finance, lead to a noticeable drop in production and employment in H2 2022. The prerequisites for this scenario have already partially come true due to the unstable supply of gas and oil from Russia, but not yet with full effect. However, the preliminary GDP indicator rose in Q2 2022, and the current economic ac tivity is at a high level. With a stable macro-economic situation, Denmark is in a good position to withstand the possible economic headwinds to come.

Inflation keeps accelerating and reached 8.8% in July – the highest increase in consumer prices since 1983. It is no longer mainly driven by higher energy prices but has spread to many other commodities and “core inflation” has risen to 5.5%. The Danish Central Bank increased its policy rate by 50bp in July following the European Central Bank. Further increases in Den mark will depend on the path taken by the European Central Bank. The 10-year Danish government bond yield rose from 0% at the beginning of 2022 to 1.5% at the end of Q2. The average yield on Danish mortgage bonds with long maturity rose from 1.6% to 3.4%.

This – in combination with tighter credit standards in banks and mortgage institutes – has made financing more expensive and restricted. Although interest rates have fallen slightly in July, the general expecta tion is that yields will be higher by the end of 2022.

The Danish commercial property market expe rienced a slowdown in investment activity in Q1 2022. The war in Ukraine, accelerating inflation and rising interest rates raised fear of stagflation. As a consequence of this uncertainty, investors became more cautious. However, investment activity made a strong comeback in Q2 with a record high transaction volume of DKK 24.4 billion, indicating a spill over of deals from Q1 to Q2. The total transaction volume of DKK 43.9 billion in H1 2022 was largely at the same – very high – level as in 2021. The strong investment activity has continued into Q3. Investment activity is supported by a significant interest from foreign buyers. International investors have increased their presence on the Danish market in recent years and that trend has continued in 2022 where foreign buyers accounted for 54% of the transaction volume. Pur chases by international investors increased by 9%, while there was a decrease of 10% in the acquisitions made by Danish investors. International investors’ appetite is directed towards residential and industrial properties. So far, in 2022 some 85% of the foreign acquisitions were within these two segments.

Contact: Robin Rich robin.rich @newsec.dk

Uncertainty is rising but Denmark is in a good position to withstand headwinds to come

“ With a stable macroeconomic situation, Denmark is in a good position to withstand the possible economic headwinds to come”

Interesting trends on the Danish property market in 2022

Where will rents go in the current high-inflation environment?

As most lease contracts are normally reg ulated annually by the change in the net price index, and since this index is cur rently increasing by 8-9% (compared to an average of 0.9% over the last 10-years), this could result in a significant and general rise in rental levels in H2 2022 and 2023. The development in rents will, of course, depend on the overall balance between supply and demand, but also on the concrete bargaining position of the tenant versus the landlord. Most impor tantly, however, is whether there will be a political response to the situation. The government has suggested that a tempo rary upper limit of 4% increase in rents be imposed on residential properties.

Will residential investment suffer or benefit from a softer owneroccupier market?

The market for owner-occupied housing is cooling down. The number of transac tions has fallen since mid-2021 and the growth in sales prices has slowed down.

Housing prices on the owner-occupier market could come under pressure in H2 2022 due to higher interest rates and the – inflation driven – erosion of household’s disposable income. So far, there are no signs of a weakening of the residential

investment market. On the contrary, the transaction volume remains extraordi narily high. However, the market is very much centred around the main cities with strong demographic and economic growth. The rental market may appear to be more attractive and accessible to many households in the current envi ronment with uncertainty about the direction of the owner-occupied housing market and tighter access to finance.

Will office demand be able to match new supply in 2022–2023?

Despite many predictions about the “death of the office”, demand for office space has recovered well from COV ID-19. Strong take-up in Copenhagen has brought the vacancy rate down to 6.8%. This drop occurred while a substantial number of new offices were completed.

In 2022 some 110,000 sqm will be added to the market and another 212,000 sqm will follow in 2023. So far, new demand has been sufficient to balance new supply, but take-up is required to remain high in order to maintain that balance and to avoid rising vacancy rates.

Will international buyers continue to prop up the investment market?

The numerous acquisitions of large prop erties and portfolios by international

investors is the main reason for a his torically high transaction volume level. The question is whether their appetite is permanent – and if not – whether domes tic investors are willing and able to take over. The relatively high yields on Danish properties compared to many other European countries persists, which will add to the attractiveness of the Danish market. Also, many foreign investors are less sensitive to higher interest rates and tighter credit compared to many Danish buyers. Domestic buyers wishing to enhance their portfolio may increasingly be the ones with a high share of equity or placement requirements.

The Finnish property market

Record high volumes in the first half of 2022

The year 2022 started with strong growth forecasts for the economy, as well as for the real estate trans action market, as economies were opening after the pandemic lockdowns. Due to the supply shock caused by the pandemic, inflation has accelerated. This intensified with the war in Ukraine. During the spring and summer of 2022, the fear of a recession has grown stronger, and the European Central Bank (ECB) was expected to fight inflation by tightening monetary policy by raising interest rates. In July, the ECB raised its key interest rate by 0.5 %. The Finnish economy is projected to grow by 1.7% in 2022.

However, the pandemic and the war in Ukraine as well as the Chinese economy play on the uncertainty factor both globally and in Finland. Likewise, infla tion might climb higher than current forecasts, and the increase in interest rates might also occur faster than expected affecting the economic outlook.

Still, Finland’s economic situation is good for the time being and the economy might perform better than expected. The unemployment rate is expect ed to decrease further – Russia accounts for less of Finland’s exports than previously, and there exist savings which were built up during the pandemic. For the time being, inflation is expected to slow from current highs and the market sentiment does not support high interest rates in the long run.

Despite the war in Ukraine and inflation and interest rate hike pressures, the real estate market in the first half of 2022 performed exceptionally well. The first half of the year turned out to be best first half of any year so far in terms of transaction volume. In H1 2022, the real estate transaction volume was 4.3 billion euros, 1.5 times more compared to the first half of 2021. The first half of the year saw an estimated 10 megadeals worth more than 100 million euros. This is more than in any one whole year before.

Contact: Valtteri Vuorio valtteri.vuorio@newsec.fi

“ The first half of the year turned out to be best first half of any year so far in terms of transaction volume”

Interesting trends on the Finnish property market in 2022

Strong transaction market

The transaction market has continued where it left off at the end of 2021. The transaction activity, which accelerated towards the end of the year, continued in the first quarter, with real estate invest ments amounting to 2.2 billion euros.

The transaction volume of the second quarter was 2.1 billion euros. The rolling 12-month real estate transaction volume rose to more than 8 billion euros in the first quarter for the first time since autumn 2019.

The residential segment continues to make its mark on the transaction market

In the first half of 2022, most deals were made in the residential segment – in total 1.4 billion euros (32% of the total volume).

The transaction volume of the resi dential sector was one of the strongest first halves of any year. The number of international investors continues to grow within the segment. The share of interna tional investors of the transaction volume in the first half of 2022 rose to more than 50 percent. The largest deal was seen in the first quarter when Orange Capital Partners together with GIC acquired a portfolio of 37 properties owned by

Morgan Stanley Real Estate, Premico and RIM. In addition, in the second quarter, Heimstaden Bostad bought a portfolio of 64 properties from Sato, and Kojamo bought a portfolio of 13 properties from NREP.

Office strikes back

For the office segment, the transaction volume for the first half of the year also noted an increase compared to last year. In H1 2022, the real estate transaction volume was 570 million euros, an increase of 52% compared to the cor responding time in the previous year. The segment’s transaction volume was 374 million euros in the second quarter. The increase was 59% compared to the second quarter of 2021.

Retail finds a new normal Investments in retail premises in the first half of 2022 amounted to 776 million euros, of which 614 million euros in the first quarter. The biggest transaction was the Stockmann deal, where Keva bought Helsinki’s traditional department store property for 400 million euros from Stockmann in accordance with the corporate restructuring program.

A cautious market ahead

The real estate investment market is more cautious in the challenging eco nomic environment and in the market of rising interest rates. Yields are expected to rise slightly from their current levels. However, liquidity and, among other things, the activity of international in vestors is expected to persist. Long-term structural changes and real estate as an inflation hedge still benefits the asset class.

EUR 7.0 billion

Total investment volume in 2021

EUR 8.5 billion

Total investment volume expected in 2022

GDP growth expected in 2022

The Estonian property market

Developers are preparing a new wave of supply for investors

After very robust economic expansion in 2021, GDP growth is expected to slow in Estonia, especially in H2 2022. Back in the spring, economists were predicting a recession, but in fact the country can expect a positive outcome for the full year. The economy is forecast to grow 1.0% in 2022 and 0.5% in 2023. Estonia is a hot spot for rising prices in Europe and led the Baltic region at the end of Q2 2022 with

even higher figure of 23.2% – the fastest price-level

row. Average annual inflation in Estonia is expected to come in at 19.5% this year before slowing to 6.7% in 2023. Wages are projected to rise 11.0% and 7.4%

In H1 2022, real estate investments in Estonia to talled nearly EUR 130 million. Deal value was 30% higher than in H1 2021, but much lower than in H2. Estonia is the only Baltic country where investment is being led by the industrial segment, which ac counted for 44% of the total volume in H1 2022. The retail segment, especially grocery retail properties, had similar demand and accounted for 37% of trans action value. Ongoing larger deals in H2 will sustain market activity in the retail and industrial segments, with investments in the office segment set to increase as well. A total of EUR 280 million is expected to be invested in Estonia in 2022 and significantly support the liquidity of the Baltic investment market.

Most real estate investment transactions are being carried out by local Estonian investors and funds that actively invest in the Baltic region. Average transaction size in Estonia was the lowest in the Baltic region, amid a lack of larger deals of EUR 20 million and above. In Estonia, like Lithuania, outlying cities are also attracting investments, with Tallinn only getting about 60% of total investments in the country.

Contact: Kristina Živatkauskaite˙ k.zivatkauskaite@newsec.lt

“ Most real estate investment transactions are being carried out by local Estonian investors and funds that actively invest in the Baltic region”

Interesting trends on the Estonian property market in H1 2022 and beyond

Estonia’s road to energy independence

Estonia is advancing with Europe’s first new liquefied natural gas (LNG) project since Russia invaded Ukraine in Febru ary 2022. The decision was fast, and the country been constructing an offshore terminal at a round-the-clock pace. Estonia is one of the European countries that is least dependent on gas. Almost three-quarters of Estonia’s energy supply comes from locally produced oil shale. The unstable geopolitical situation has set the stage for faster development of renewable energy resources in the region as well.

Supply of new production is in the works

Lack of prime properties available for investment and tenants is fuelling the development of commercial properties, especially in the office and industrial segments. New supply that is under con struction will ease the tense situation of decreasing vacancy and rising office rent prices in late 2022 and in 2023. The indus trial segment will see new logistics and storage premises, and offices available for rent will increase as well.

More activity within the office segment

Offices are the commercial space most in demand amid a lack of new projects delivered recently. The resulting increase

in prices has been most noticeable in new modern buildings. Lack of available prime space in good locations is felt in the capital of Tallinn as well as Tartu.

Active ongoing development will provide new supply equal to about 10% of total Tallinn market stock later this year or in early 2023.

Improvements in energy efficiency are accelerating

Tenants, facing an unprecedented surge in energy prices, need to balance their costs expenses and are looking for longterm solutions that are more energy effi cient. BREEAM and LEEDS certification of existing buildings and projects under development is gaining momentum, es pecially in the office and retail segments.

The industrial segment is getting added attention as well as owners, increasingly anxious about higher energy prices, are looking for government decisions to help them survive the coming winter. Local landlords also see certification as a way to attract the attention of foreign investors.

Retail segment must withstand inflationary shocks

Higher prices can make consumers anxious and may alter their spending choices. Estonia seems to be the first country in the Baltic where annual growth of retail turnover in constant prices has started to slow.

IKEA, world’s biggest furniture brand, opens store

After 2 years operating in Estonia with only a showroom in Tallinn, IKEA has opened a store there, its third in the Baltics, in August 2022. The first IKEA store in the Baltics was built in Vilnius in 2013 and a store in Riga opened in 2018. In close to a decade of operations in Lithuania, the IKEA store there has achieved annual turnover of close to EUR 100 million. The Latvian store had retail turnover of more than EUR 80 million in its first year of operations and increased that to about EUR 100 million last year. The Estonian property’s starting point is turnover of just under EUR 35 million with only a showroom. It has a long business journey ahead.

The Lithuanian property market

Investor interest is focused on prime properties

After its solid 5.0% expansion in 2021, the Lithuanian economy has continued on a path of growth in 2022, posting a GDP increase of 3.4% for the first half of the year. Still, ever since Russia started its invasion of Ukraine in February 2022, uncertainty has risen, and economic development is under increased pressure. Estonia, Latvia and Lithuania have been members of both the European Union and NATO since 2004. Standing united with Ukraine, Lithuania continues to be a safe place to live, invest, work, and travel. Lithuania, like other EU countries, is facing economic challenges: increased energy prices, sup ply chain disruptions and rapidly rising construction costs. The high energy prices and record inflation re sulting from the war in Ukraine are key observable factors affecting economic activity. In July, annual inflation reached 20.9%, though the pace of price growth is expected to slow later in the year for an av erage 2022 inflation rate of about 16.0%. Purchasing power in Lithuania is shrinking despite the roughly 13% annual growth of wages that is forecast for 2022. Unemployment levels may not fall from where they are now given the uncertainty in the market and increasing labour costs. Average annual unemployment is expected to remain at 7.0%. A variety of fore casts suggest the Lithua nian economy could grow 1.5%-2.1% in 2022.

Despite the increased uncertainty, the commercial real estate investment market in Lithuania was active in the first half of 2022. Large investment deals amounted to EUR 150 million and represented 37% of total volume in the Baltics. The retail seg ment took the lead in H1 2022, with almost EUR 100 million in investments in Lithuania alone, but the biggest transaction was in the office sector, namely, the sale of the Girteka Park campus in Vilnius by Galio Group. Groa Capital bought the newly devel oped 14,000 sqm office project for nearly EUR 40 million. Investors in fact were focused on the office segment, seeking opportunities to acquire prime assets in central locations. Development remains active in all commercial property segments and the new supply planned for 2022 and 2023 will increase available investment-grade offerings. Planned active development of residential properties will add to the growing number of apartments-for-rent projects, while the industrial segment will see a number of new manufacturing facilities and expansions of ex isting projects. International investors behind such developments include Continental, Hella, Homanit, Thermo Fisher, Teltonika and others. With an ex tensive pipeline of factories under development and many plans announced, Lithuania remains one of Europe’s and the world’s most attractive destinations for manufacturers.

Contact: Kristina Živatkauskaite˙ k.zivatkauskaite@newsec.lt

“ Standing united with Ukraine, Lithuania continues to be a safe place to live, invest, work and travel”

Interesting trends on the Lithuanian property market in H1 2022 and beyond

Prime property yields increase after a small dip

Investors’ focus on prime assets remains very similar across the office, retail and industrial segments. Falling yields were observed during the first half of 2022 and yields in all segments had the potential to decrease further, but the current level of yields forecast for the year end is the same as it was in 2021. Rising interest rates have put pressure on property yields in the Baltics. The forecast for prime office yields in the region is at 5.50%; on the Vilnius market, it is 5.20%. The yield forecast for industrial and logistics centres stands at 6.75%. Prime retail yield forecasts have been steady at 7.00-7.25%, with significantly lower levels for grocery retail properties which are in heavy demand.

Market liqudity expected to persist

Local investors in the Baltic region continue to be active in the investment market, so liquidity in the market is expected to remain. The volume of transactions will decrease this year due to a continuing lack of supply of prime properties, especially with investment focus diverted from secondary locations and secondary assets. The Baltics will not yet see a significant return of foreign buyers, who are currently focused on other markets. Activity on the Lithuanian investment market should significantly

contribute to market liquidity in the Baltic countries in 2022. It is predicted that the Lithuanian market will contrib ute a third of the total investment volume forecast of about EUR 900-1000 million.

Unlocking infrastructure investment

As attractive prospects for capital alloca tion decrease, investors are exploring new opportunities. Infrastructure investments and the development of investment funds will be a new direction in the market. Investors are discovering the investment opportunities that infra structure and renewable energy offer, and are paying increasing attention to Environmental, Social and Governance (ESG) factors as well.

Jump in new residential rent supply Development companies active in Lithuania and the other Baltic countries are steadily acquiring territories for de velopment, with a new – residential rent – segment growing more pronounced in the investment market. We will see an increase in supply of residential proper ty for rent and further development of this segment as new stock is added to the market.

Postponed deals and longer sale processes expected

Owners of prime-quality assets and portfolios are testing the potential to

sell them on the market. Local invest ment funds are currently cash rich and opportunities to purchase real estate are greater than ever, but a mismatch between sellers’ and buyers’ expectations may delay actual transactions.

Retail is attracting significant investor attention

The retail segment, which includes vari ous types of retail properties, has gained momentum, with record investor activity for a 3rd half-year in a row. The number and total value of transactions concluded in the first half of 2022 exceeded expectations. Investors are reaffirming their con fidence in the future of shopping malls and brick-and-mortar businesses. Major retail deals were done in Lithuania, mainly for projects in the outlying cities of Klaipeda (Taikos64 SC) and Panevezys (Babilonas SC) and in the capital Vilnius (Mandarinas SC). Well established and performing properties were in great demand. The main investors in retail properties, as in other commercial segments, are local companies active on the Baltic market.

EUR

million

Total investment volume in 2021

Total

expected in 2022 as a whole

in 2022

The Latvian property market

Another active period for investors

The Latvian economy continues showing resilience to the fallout from Russia’s invasion of Ukraine, but development is already slowing. Energy costs are rising to new records and pushing inflation higher. GDP in Q2 2022 grew by a preliminary 2.6%, with the overall price level up 19% from a year ago. Unem ployment, however, stood at 6.4% at the end of Q2 and was down 1.4 percentage points compared to the end of Q1.

Still, under the latest Bank of Latvia forecasts, GDP is set to grow 2.9% in 2022, 2.4% in 2023 and 4.2% in 2024. Overall inflation is forecast at 14.8% in 2022, 7.0% in 2023 and 2.4% in 2024. In H1 2022, total real estate investments exceeded EUR 120 million.

Despite increased uncertainty, investment volume was only 15% lower than in the same period last year. The drop was due to a smaller average trans action size, though Q2 2022 was more active than Q1. Retail remained the dominant market segment in H1 2022 as it was in 2021.

Real estate investors and property developers natu rally have been more cautious and concerned in 2022 given the region’s geographic proximity to Russia. Some investors have tested their ability to dispose of real estate and some developers have considered selling half-built projects or sites previously acquired for development. Still, the development of new real estate objects is continuing, even if more slowly than initially planned.

Due to a pandemic-related boom in housing demand, residential prices in Riga and Latvia have continued to rise. In H1 2022, the increase in prices for new apartments was more pronounced than last year, mainly due the higher demand and construction costs. Construction costs in Q2 2022 were up an average 42% compared to 2015 and increased by 22% over a year.

Contact:

Inita Nitiša i.nitisa@newsec.lv

Kristina Živatkauskaitė k.zivatkauskaite@newsec.lt

“ Due to a pandemicrelated boom in housing demand, residential prices in Riga and Latvia have continued to rise”

Interesting trends on the Latvian property market in H1 2022 and beyond

Like last year, most investments were in retail

In H1 2022, the majority of investment deals were in the retail segment, which accounted for more than 75% of total investment volume.

The largest deals were the acquisition of Damme shopping centre by Summus Capital, the acquisition of the Grostonas 1 shopping centre by Eika Asset Manage ment, and the purchase of a shopping centre on Stirnu Street by Hili Properties. At the Damme and Stirnu Street shop ping centres, the anchor tenant is a Rimi hypermarket, while at Grostonas 1 it is a Maxima XXX hypermarket.

Latvian market continues to attract new investors

As previously, in H1 2022, too, the Latvian market proved most attractive to neighbouring investors: most properties were bought by entities from Estonia or Lithuania.

Last year a new Finnish investor, the Titanium Baltic Real Estate Fund, en tered the Latvian investment market. This year the fund acquired another property. The seller of both properties was KS Holding. This year four new investors acquired properties in Latvia: three funds and a pharmaceutical com pany. The newly established Estonian

fund manager Green Formula Capital acquired a medium-size retail centre on Kurzemes Prospekts in Riga, while Eika Asset Management of Lithuania acquired a shopping centre at Grostonas 1 with Maxima as the anchor tenant. Mean while, ICG Farma purchased another retail building at Krasta 52 with a Jump Space entertainment centre and Dino Zoo pet store as anchor tenants. And an LHV Bank pension fund acquired five residential properties in one transaction – three new and two renovated residen tial buildings in Riga. The total area of the buildings is about 4,000 sqm across 109 apartments, of which almost all were already rented out.

The office market in Riga is still the most active submarket

Developers continue work on their office projects even though the timelines of some projects have been pushed back. Key factors in the delays are surging con struction costs and supply disruptions. In August 2022 the first stage of the Verde office project was delivered, supplying the market with 15,000 sqm of highquality net leasable area of which more than 70% is leased out already. Mean while construction on the second stage of the Verde continues. Five other signifi cant office projects are in the construc tion stage as well. They are mostly class A and will supply about 110,000 sqm of new

office space. Delivery of these projects is currently scheduled for H1 2023 but, given the current market situation, likely will be pushed back.

Utility bills play a significant role

As energy and overall prices rise, utility costs are growing too. It is uncertain how long energy prices will continue increasing and how heavily that will ultimately affect utility prices. Thus this year tenants and developers are paying extra attention to utility bills and other expenses on top of rent. Some property owners are willing to offer rent discounts while others are raising management fees citing the overall rate of inflation.

EUR 610 million

Total investment volume in 2021

EUR

Total

million

expected in 2022 as a whole

GDP

expected in 2022

European Markets at H1 2022

2022 is shaping up to be a transformative year for real estate markets in Europe. Macroeconomic events prompted realization that elevated inflation will continue far longer than originally anticipated. For the asset markets, it means more uncertainty in interest rates plus early closure of most unorthodox policies like QE. The outcome is an accelerated pro

For real estate, this represents not a price correction but a reset that will establish new market norms. Consequently, the market is entering a “grey” period of pricing uncertainty over H2 2022 where buyer expectations are not meeting those of sellers.

The outcome for real estate investment is quite clear:

up on H1 2021. The first quarter witnessed strongest expansion at €63.3 billion nearing the pre-pandemic highs. The second quarter (at €52.1 billion) shows signs of slowdown. This is not surprising given the development in the macroeconomic environment.

Total investment is slowing in all the major markets though the sectors are not all responding in the same way. On a rolling year basis, office investment (-6% vs Q1 2022) is slowing the fastest, followed by logis tics (-4%), while hotels investment and retail volumes are stable. This may reflect cyclical positions of each and their market fundamentals.

Yield decompression now inevitable

The uncertainty in the financial environment represents an element of unpredictability that has re-entered asset pricing. In a more aggressive interest rate environ ment, the previous model of real estate pricing is no longer sustainable. It means that yields prevailing across Europe are not compatible with debt servic ing and the level of rental growth likely to occur cannot support existing price levels. The inevitable outcome is yield decompression across the three main sectors until a new equilibrium is attain.

This is not a factor of lack of demand, this clearly is still there; it is the parameters that make investment profitable that are changing. Currently, yields are in their “pause and adjust” phase so as of Q2 2022 are stable. The European composite yields for retail and logistics stood at 3.4% and 3.5% respectively, unchanged over H2. The composite office yield for Europe stood at 3.2% for the 16 top markets. It is likely that by end of 2023 European office yields may have expanded by between 25 to 50 basis points.

A pivotal year that will transform risk reassessment

Office demand continues to grow albeit selectively

Prime office yields are likely to be the most enduring with modern units in CBDs as they hold the most promising prospects. In Q2 2022 yields in markets like Brussels (-50 bps), Prague (-25 bps), Madrid (-25 bps) and Milan (-20 bps), are lower on annual basis. In markets like London, they are flat and Berlin has posted decompression of 5 bps. Historical data not withstanding, yield compression has clearly ended. Investment on an annual basis still 4% up on H1 2021 at €46.7 billion though Q2 witness a sharp slowdown in activity.

Occupational demand in contrast continues to expand. It is no longer accurate to talk about office markets in recovery a Europe attained that in Q4 2021. Transactions of around 4.669 million sqm occurred over H1 in the 17 main European markets, up 39% compared to last year. H1 2022 activity sur passed the 10-year, over same period, average by 7%. Most markets showed significant improvements in volumes, including Dublin (+346%), Central London (+122%), Warsaw (+95%), Munich (+67%) and Luxembourg (+53%).

Demand is unambiguously expanding across the major cities though it is a bifurcated market as demand focuses on the best quality unit. Rental patterns are following this dynamic, as is vacancy. The overall vacancy rate in Europe stood at 7.1% at the end of Q2 (stable vs. Q2 2021). Cities like London, Berlin and Paris all witnessed 30 basis points ex pansion in vacancy in H2 2022 mostly due to lower take-up of poorer quality units. Low availability in central submarkets and in new buildings, and much higher vacancy rates in peripheral office districts, continues to characterise cities.

We think there will be a short-term push to office rents from inflation that will result in growth for

prime units in Europe. Many secondary buildings may not benefit from inflation uplift. The gas crisis is renewing focus on operational costs and the interest of occupiers this year has concentrated on energy efficient buildings. This can only grow going forward and will widen the gap of modern and secondary.

now very active, it is likely to result in better revenue and aid rental recovery from 2023.

Logistics rental growth is strong European logistics investment is also slowing. Activity at €25.2 billion for H1 2022 is 10% down on the same period year so is healthy. The momentum is little slower and yield decompression is already popping up in markets such as Germany, France and the Netherlands.

Take-up in the 6 leading countries rose by 13% to 14.9 million sqm in H1. Like investment, logistics occupational is showing signs of selective slowdown with weaker demand in places like the Netherlands and UK. This is a complex situation due to a combi nation of slightly weaker demand and problems securing suitable space. Vacancy in the logistics sector continues to operate at historic lows with the European average below 4%. There are few speculative developments in any country.

The retail sector has a longer road to recovery Investment in retail picked up over 2022 to €19.1 billion (18.9% on H1 2021) with more interest espe cially in shopping centres. Yet the macroeconomic changes mean full restoration of the retail sector as an attractive investment now has much longer recovery period.

Although the pandemic is behind us, positive rental growth is still some distance off, although 2022 may see the floor for rental decline. Inflation and the implications for more selective consumer spend will focus the minds of retailer on cost control: they will be less keen on taking expensive units without clear revenue improvement. City centres have high percentage of tourist sales. As the tourism sector is

The supply issue inhibits the sort of strong take-up seen previously and prompts two responses: innovation in delivery operation and rental increases for available units. Prime rents increased by 12.2% over the last 12 months in Europe, notably in the UK where growth of around 25% occurred in London and Birmingham. Rental growth is receiving an indirect boost from materials inflation associated with construction.

Samuel Duah, PhD, Head of Real Estate Economics at BNP Paribas Real Estate

“ Total investment is slowing in all the major markets though the sectors are not all responding in the same way”

Macroeconomic Data

Sweden

Economic Indicators

Per cent

Source: Newsec

Norway

Economic Indicators

Per cent

Source: BNP Paribas Real Estate

Finland

Economic Indicators

Per cent Source: BNP Paribas Real Estate

2022E

GDP, Annual Percentage Change Private Consumption, Annual Percentage Change Employment, Annual Percentage Change Inflation, Yearly Average

Interest Rates

Per cent

Source: Swedbank, Swedish Central Bank

GDP, Annual Percentage Change

Private Consumption, Annual Percentage Change Employment, Annual Percentage Change Inflation, Yearly Average

Interest Rates

Per cent

2022E

GDP, Annual Percentage Change

Private Consumption, Annual Percentage Change Employment, Annual Percentage Change Inflation, Yearly Average

Interest Rates

Source: BNP Paribas Real Estate

Per cent

2022E

Central

Central Bank Interest Rate NIBOR

2022E

Source: BNP Paribas Real Estate

2022E

Central Bank Interest Rate EURIBOR 3M SWAP

Denmark

Economic Indicators

Per cent

Source: BNP Paribas Real Estate

LatviaEstonia

Economic Indicators

Per cent

Source: BNP Paribas Real Estate

Economic Indicators

Per cent

-4

GDP, Annual Percentage Change Private Consumption, Annual Percentage Change Employment, Annual Percentage Change Inflation, Yearly Average

Interest Rates

Per cent

2022E

GDP, Annual Percentage Change

Private Consumption, Annual Percentage Change Employment, Annual Percentage Change Inflation, Yearly Average

Interest Rates

Source: BNP Paribas Real Estate

Per cent

2022E

-1

Central

the complete data set

2022E

CIBOR

EURIBOR 3M SWAP

Source: BNP Paribas Real Estate

2022E

Source: BNP Paribas Real Estate

2022E

GDP, Annual Percentage Change Private Consumption, Annual Percentage Change Employment, Annual Percentage Change Inflation, Yearly Average

Interest Rates

Per cent

Source: BNP Paribas Real Estate

2022E

EURIBOR 3M SWAP

Macroeconomic Data

Lithuania

Economic Indicators

Per cent

Source: BNP Paribas Real Estate

GDP Growth

GDP Growth 2021–2022E

Per cent

2022E

GDP, Annual Percentage Change Private Consumption, Annual Percentage Change Employment, Annual Percentage Change Inflation, Yearly Average

Interest Rates

Per cent

Source: BNP Paribas Real Estate

2021 2022E

2022E

LithuaniaLatviaEstoniaDenmarkFinlandNorwaySweden

Source: BNP Paribas Real Estate

Buy the complete data set

-1

Property Data Property Data

0

Prime Office Rents (CBD) | Nordic Region

Source: Newsec

Per cent EUR/m2

1,000

800

Prime Office Yields | Nordic Region

Per cent

Source: Newsec

Prime Retail Rents | Nordic Region

Source: Newsec Per cent EUR/m2

3.000

0

Stockholm Gothenburg Malmö Oslo Helsinki Copenhagen

Average Annual Rental Growth 2017–2021 (left axis)

Forecast Average Annual Rental Growth 2022E–2024E (left axis)

Rent Level 2022E (right axis)

2 4 6 8 10 Office yields

600

400

200

Prime Office Rents (CBD) | Baltic Region Source: Newsec

Per cent EUR/m2

Tallinn Riga Vilnius

Average Annual Rental Growth 2017–2021 (left axis)

Forecast Average Annual Rental Growth 2022E–2024E (left axis)

Rent Level 2022E (right axis)

400

Stockholm Gothenburg Malmö Oslo Helsinki Copenhagen

Prime Office Yields | Baltic Region

Per cent

Office rents -3

0 100 200 300 Retail rents

-100

1.000

0

2022E

Stockholm Gothenburg Malmö Oslo Helsinki Copenhagen

Average Annual Rental Growth 2017–2021 (left axis)

Forecast Average Annual Rental Growth 2022E–2024E (left axis)

Rent Level 2022E (right axis)

Source: Newsec Tallinn Riga Vilnius

Prime Retail Rents | Baltic Region Source: Newsec Per cent EUR/m2

600

-2 -1 0 1 2 3 2022E

Tallinn Riga Vilnius

Average Annual Rental Growth 2017–2021 (left axis)

Forecast Average Annual Rental Growth 2022E–2024E (left axis)

Rent Level 2022E (right axis)

400

300

200

0 1 2 3 4 2.000

100

0

Property Data

Retail yields

Prime Retail Yields | Nordic Region

Per cent

Source: Newsec

Logistics rents

Prime Logistics Rents | Nordic Region

Source: Newsec

Per cent EUR/m2

Logistics yields

Prime Logistics Yields | Nordic Region

Per cent

2022E

Stockholm Gothenburg Malmö Oslo Helsinki Copenhagen

Prime Retail Yields | Baltic Region

Per cent

Tallinn Riga Vilnius

Source: Newsec

Stockholm Gothenburg Malmö Oslo Helsinki Copenhagen

Average Annual Rental Growth 2017–2021 (left axis)

Forecast Average Annual Rental Growth 2022E–2024E (left axis)

Rent Level 2022E (right axis)

Prime Logistics Rents | Baltic Region

Source: Newsec

Per cent EUR/m2

Stockholm Gothenburg Malmö Oslo Helsinki Copenhagen

Source: Newsec

2022E

Tallinn Riga Vilnius

Average Annual Rental Growth 2017–2021 (left axis)

Forecast Average Annual Rental Growth 2022E–2024E (left axis)

Rent Level 2022E (right axis)

2022E2021

Prime Logistics Yields | Baltic Region

Per cent

Source: Newsec

2022E

Tallinn Riga Vilnius

Property Data

Transaction volume

Transaction Volumes — Quarterly | Nordic Region

BEUR

0

Source: Newsec

Office new construction

Office New Construction (Capital Office Market) Source: Newsec

Thousand m2 Per cent of stock

0

Sweden Norway Finland Denmark

Stockholm Oslo HMA Copenhagen Tallinn Riga Vilnius 2021 (left axis) 2022E (left axis) 2022E (right axis)

Transaction Volumes — Quarterly | Baltic Region

MEUR

0

2013

Estonia Latvia Lithuania

Source: Newsec

adam.tyrcha@newsec.se

Office stock

Office Stock Q4 2022E (Capital Office Market)

Million m2

2 4 6 8 10 12 14 Buy the complete data set

Source: Newsec

0

Stockholm Oslo HMA Copenhagen Tallinn Riga Vilnius

Definitions

General

• All rents, yields and vacancies are end-of-year values.

• All forecasts are referring to nominal values.

• The rental levels are the most probable prime rent when signing a new lease agreement.

• All yield levels are referring to net initial yield.

Offices

• The forecast is referring to new/refurbished modern and flexible office premises with normal area effectiveness.

• The rents are referring to premises of at least 500 sqm.

• The rent is excluding heating and excluding property tax.

Retail

• The rents are referring to modern retail premises of 70–250 sqm.

• The rent is excluding heating and excluding property tax.

• The rents refer to prime areas with definitions by each country.

Residential

• The forecast is referring to attractive locations with an area of around 80 sqm.

• Definitions generally, as well as of new and old housing depend on the country.

Logistics

• The forecast is referring to warehouses and logistics premises.

• The rents are referring to premises of 5,000–10,000 sqm with a 10 year lease agreement.

• The rent is excluding heating and property tax.

• The rent refers to modern, newly built premises with a solid lease contract and tenant A properties.

Public Properties

• A public property is defined as a property used predominantly for tax-financed operations and specifically adapted for community service. In this document, public properties are limited to schools (pre-schools and primary schools), hospitals, and elderly care homes.

• The market data refers to public property premises of normal to modern standard with normal space efficiency.

• The market rent refers to the rent excluding supplements.

Exchange rates

All rents and transaction volumes are calculated using the average exchange rates in 2021.

The Newsec Property Outlook Team

Max Barclay

Head of Newsec Advisory

Sweden Norway

Ulrika Lindmark

Head of Valuation, Research & Strategic Analysis

ulrika.lindmark@newsec.se

Øyvind Johan Dahl Head of Research ojd@newsec.no

Adam Tyrcha, PhD Head of Research & Strategic Analysis

adam.tyrcha@newsec.se

Karen Cecilie Thunes Senior Analyst karen.cecilie.thunes@newsec.no

Ravi Barot Associate ravi.barot@newsec.se

Christian Hagen Senior Analyst christian.hagen@newsec.no

Denmark

Baltics

Morten

Transforming real estate, and beyond

Newsec manages more properties and carries out more transactions, more lettings and more valuations than any other firm in Northern Europe. Through this great volume, and the knowledge and depth of our various operations, we acquire extensive and detailed knowledge of the real estate market. In turn, we can quickly identify business opportunities that create added value.

Our prime market is Northern Europe, but through our alliance membership with BNP Paribas Real Estate, we offer our services on the global market. This makes Newsec Northern Europe’s only full service property house, and provides us with a unique ability to forecast the future.

A history of growth

Newsec is the result of a unique history of growth, characterised by constant originality of thinking. The first issue of the comprehensive market analysis, Newsec Property Outlook, was published in 2001.

The Group expanded internationally into Finland in 2001, Norway in 2005, the Baltic countries in 2009 and Denmark in 2016. The Norwegian asset and property management companies First Newsec Asset Management and TM Partner were acquired in 2012. In 2013, Newsec acquired Jones Lang LaSalle’s Swedish property management operation. In 2017, Newsec grew with the acquisitions of Norwegian Basale and Danish Datea, further strengthening the position within Property Asset Management.

Newsec was founded in 1994 and is today a partnerowned company with some 2 400 co-workers spread across the seven Nordic and Baltic countries. Newsec has approx. EUR 68 billion under management and annually signs lease agreements of approx. 1.5 million square meters, manages transactions of some EUR 3 billion and does real estate valuations of underlying property worth almost EUR 265 billion. Thanks to large volumes, one of the largest property databases, a local presence combined with in-depth understanding of a range of businesses, Newsec has a unique expertise of the real estate market in northern Europe.

Norway

Finland

Newsec's data deliveries & market reports

Thanks to Newsec having one of the most comprehensive data bases for real estate related data in the Nordics we are able to offer tailormade data deliveries and analyses. We also offer analyses and segment market reports which provide you with a valuable summary of the property market.

Market Report Residential Market Report Construction Rights Market Report Future Growth Markets Market Report Office Market Report Logistics Market Report Projects Market Report Retail Market Report Public Properties Sedis Report Newsec's Transaction List Valueguard Market Report Nordic Market Access Newsec’s market report portal here: https://www.marknadsrapporter.se/store. For Request any data to suit your needs

more information about

adam.tyrcha@newsec.se

deliveries and analyses customized to your needs contact: adam.tyrcha@newsec.se

Contact and addresses

Sweden info@newsec.se

Stockholm Stureplan 3

P.O. Box 7795

SE-103 96 Stockholm, Sweden

Tel: +46 8 454 40 00

Stockholm Humlegårdsgatan 14 P.O. Box 5365

SE-102 49 Stockholm, Sweden

Tel: +46 8 55 80 50 00

Gothenburg

Sankt Eriksgatan 5 P.O. Box 11405

SE-404 29 Göteborg, Sweden

Tel: +46 31 721 30 00

Gothenburg

Kungsportsavenyn 33, 5 tr SE-411 36 Göteborg, Sweden

Tel: +46 31 733 86 00

Öresund Office

Davidshallsgatan 16

SE-211 45 Malmö, Sweden

Tel: +46 40 631 13 00

Norway info@newsec.no

Oslo Filipstad Brygge 1 P.B. 1800 Vika NO-0123 Oslo, Norway Tel: +47 23 00 31 00

Trondheim Beddingen 10 NO-7042 Trondheim Norway

Denmark Newsec Advisory in Denmark info@newsec.dk

Copenhagen Silkegade 8 1113 Copenhagen Tel: +45 33 14 50 70

Aarhus Skanderborgvej 277, 1. sal, blok 1 8260 Viby J Tel: +45 87 31 50 70

Newsec Property Asset Management in Denmark pam@newsec.dk +45 26 01 02

Lyngby Lyngby Hovedgade 4 2800 Kgs. Lyngby

Aarhus Viby Ringvej 2B, #. 8260 Viby J

Næstved

Ringstedgade 24, 1.tv 4700 Næstved

Finland info@newsec.fi

Helsinki Mannerheiminaukio 1 A P.O. Box 52 FI-00101 Helsinki, Finland

Tel: +358 207 420 400

Tampere Aleksanterinkatu 32 B FI-331 00 Tampere, Finland Tel: +358 207 420 400 Turku Yliopistonkatu 16 C FI-20100 Turku Finland Tel: +358 207 420 400

Estonia info@newsec.ee

Tallinn

Pärnu mnt 12 EE-10146 Tallinn, Estonia

Tel: +372 533 05313

Latvia info@newsec.lv

Riga Vesetas iela 7 LV -1013 Riga Latvia

Tel: +371 6750 84 00

Lithuania info@newsec.lt

Vilnius

Konstitucijos ave. 21C, Quadrum North, 8th floor LT-08130 Vilnius, Lithuania

Tel: +370 5 252 6444

United Kingdom London

The Clubhouse 50 Grosvenor Hill W1K 3QT London

Transforming real estate, and beyond